HC finds CA guilty of Forging Cheques and using Clients Tax amount for personal use [Read Order]

The Delhi High Court in the matter of CA SUBODH MAHESHWARI Vs. INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA has found CA guilty of Forging Cheques and using Client’s Tax amounts for personal use.

The Petitioner wants to overturn the Order dated 30.07.2023, issued by the Appellate Authority, ICAI, requiring the removal of the Petitioner’s name from the ICAI’s Register of Members for a term of nine months and imposing a fine of Rs.1,00,000 on the Petitioner. The Petitioner further wants to overturn the Disciplinary Committee of the ICAI’s Order dated 10.02.2022, which found the Petitioner guilty of Professional Misconduct under the Chartered Accountants Act, 1949 (hereinafter referred to as “the CA Act”).

According to the facts of the case, one Dr. Kanchan Kumar Saxena, CEO of Bhopal Sahakari Dugdha Sangh, Maryadit, Bhopal Co-operative Society (hereinafter referred to as “the Society”), filed a complaint in Form – 1 against the Petitioner herein. The Petitioner is said to have worked as a Tax Consultant for the Society. Between 2013 and 2015, the Society issued cheques totalling Rs.1.90 crores to the Petitioner herein in his professional capacity for tax deposits with the Statutory Authorities.

It is alleged in the complaint that instead of depositing the said tax amount with the concerned Statutory Authorities, the Petitioner herein forged the cheques and transferred Rs.1.90 crores into his and his wife’s bank account.

It is said that upon learning of the offence, the Society filed an FIR, FIR No.1024/2015, dated 22.12.2015, at Police Station Gobindpura for offences under Sections 420, 409, 467, 468, 471, 34 IPC. It is stated that a copy of the complaint was forwarded to the Petitioner herein via letter dated 10.02.2017 with a request to send his written statement in accordance with Rule 19 (1) of the Chartered Accountants (Procedure of Investigation of Professional and Other Misconduct and Conduct of Cases) Rules, 2007 (hereinafter referred to as “the Conduct Rules”).

According to the evidence on file, the Petitioner herein rejected the allegations levelled against him in his written statement and indicated that the complaint is motivated and malicious. The Petitioner also contested the accusation of misappropriation of money received from the Society in his professional capacity, claiming that the entire value of Rs. 1.90 crores had been transferred to the Society. The written statement also mentioned that the Petitioner had received anticipatory bail from the High Court of Madhya Pradesh in Jabalpur.

The Petitioner contends that he worked as a Tax Consultant for the Society only until 31.03.2013 and was not liable for the deposit of any tax beyond that date, thereby absolving him of any obligation to deposit the aforementioned amount.

The Disciplinary Directorate, ICAI, found in an order dated 09.12.2017 that the amount of Rs. 2.60 crores had been remitted to the Respondent in different trenches by way of 12 cheques dated between 29.10.2013 and 19.06.2015 for the payment of tax and that, despite the Petitioner’s submission that he had returned the money of the Society, Rs.70 lakhs remained to be recovered from him. The Disciplinary Directorate further rejected the Petitioner’s claim that because he had only worked for the Society until March 30, 2013, he was not required to work as a Chartered Accountant of the Society.

The Disciplinary Directorate determined that the Petitioner had placed on record the letter dated 03.02.2015 in which the Petitioner himself referred to the M.P. Vat, Entry Tax, and Central Sales Tax assessment orders for the years 01.04.2012 to 31.03.2013, indicating his continued association with the Society even after 2013. As a result, the Disciplinary Directorate has concluded that the Petitioner is guilty of “other misconduct” as defined in Clause (2) of Part IV of the First Schedule and Professional Misconduct as defined in Clause (4) of Part II of the Second Schedule to the Chartered Accountant Act.

As a result, in accordance with Rule 18 of the Conduct Rules, a copy of the Disciplinary Directorate’s prima facie view, as well as a copy of the documents relied on by the Disciplinary Directorate, was provided to the Petitioner, and the Petitioner was instructed to respond.

The Disciplinary Committee found that the Petitioner continued to be engaged with the Society after 2013, and that Rs.2.60 crores had been sent to his and his family members’ accounts in several trenches using 12 checks. The Committee was startled to learn that, despite being a Chartered Accountant, neither the Petitioner nor his family members had checked how these funds were displayed in their bank accounts. As a result, the Committee determined that the Petitioner committed Professional and/or Other Misconduct in violation of Item (2) of Part IV of the First Schedule and Item (4) of Part II of the Second Schedule to the Chartered Accountants Act.

In a separate Order dated 26.08.2022, the Committee issued a punishment of removing the Petitioner’s name from the Register of Members of the ICAI for one year, together with a fine of Rs.1,00,000. Following that, the Petitioner herein filed an appeal with the Appellate Authority against the aforementioned Order.

There is no evidence that the Appellate Authority has stayed the Disciplinary Committee of the ICAI’s Order of Punishment. It is worth noting that the authorized representative of the Petitioner herein stated before the Appellate Authority that the Petitioner did not contest the charges of misconduct but only contended that the punishment imposed on the Petitioner was too harsh and thus prayed for a reduction in the quantum of punishment.

The Appellate Authority denied the appeal in an order dated July 30, 2023. However, the Appellate Authority lowered the sentence from a year to nine months. This Order is being challenged in the current Writ Petition.

According to the learned Counsel for the Petitioner, the ICAI did not follow the procedure outlined in the Conduct Rules. He also claims that the Disciplinary Committee’s decision to proceed with the matter under Rule 9(2)(b) of the Conduct Rules is contradictory because the notice to the Petitioner does not identify why additional procedures are to be initiated against the Petitioner. He claims that the procedures on January 29, 2021 violated the Conduct Rules because no charges were filed against the Petitioner. He also claims that the Committee did not allow the Petitioner to provide evidence and instead continued with the arguments.

At the outset, it should be mentioned that in the Appeal, the learned Counsel for the Petitioner had admitted the guilt of the Petitioner herein. The relevant portion of the Order dated 30.07.2023, passed by the Appellate Authority reads as under:

“10. Today, the Learned Authorized Representative for the Appellant, after arguing the matter for some time, has fairly conceded that he does not dispute the order dated 10.02.2022 (findings) of the Disciplinary Committee holding the Appellant ‘Guilty‘ of professional and other misconduct falling Within the meaning of Clause (2) of Part IV of the First Schedule and Clause (4) of Part II of the Second Schedule to the Act, however, he has submitted that the punishment awarded, by order dated 26.08.2022, is too harsh and prayed for reduction in the quantum of punishment.”

The only argument, therefore, raised before the Appellate Authority was that the punishment imposed on the Petitioner is disproportionate to the misconduct committed by him and more so because the entire money has been returned back to the Society.

The role and function of a Chartered Accountant (CA) is extremely important in the functioning of any organization. Given the nature of duties discharged by a CA, they enjoy the full faith and trust of all parties, and thus, the profession of Chartered Accountancy requires utmost sincerity, with no place for dishonesty. The Conduct Rules indicate that Chartered Accountants must perform their jobs with integrity and it also indicates zero tolerance towards the CA if dishonesty is proved.

The present case is a classic case of clear dishonesty on the side of the Petitioner. The evidence on file shows that even after the Petitioner herein ceased to be the Society’s CA, he remained involved in the Society’s operations until 2015. The Society issued cheques to the Petitioner in good faith, and he misused the funds and cashed the checks. Even if the money was returned after the FIR was filed, the fact that it was returned does not exonerate the Petitioner of the default.

Material on record demonstrates that the procedure that is required to be adhered to on finding of professional misconduct by the Disciplinary Committee has been duly followed. The Petitioner has not been able to demonstrate any prejudice that has been caused to him by the Disciplinary Committee. In any event, once the Petitioner has already admitted to his guilt before the Appellate Authority, it does not lie in the mouth of the Petitioner anymore to challenge the Order on the ground that the procedure has not been followed by the Committee.

It is generally established that when exercising jurisdiction under Article 226 of the Indian Constitution, the Courts must only look into the decision-making process and not the decision itself when interfering with the decision of the Disciplinary Committee. If the decision-making process is fair, Writ Courts must not overturn a Disciplinary Committee’s findings. In this matter, the Petitioner has not been able to explain how the Disciplinary Committee’s method is unreasonable or unfair, or how it violates natural justice principles.

The Petitioner is guilty of very serious misconduct that has the ability to shake the faith of persons in the profession of Chartered Accountancy and the larger Institute of Chartered Accounts. The Appellate Authority has been considerably lenient on the Petitioner by reducing the period of punishment from one year to nine months. This Court is of the opinion that no further reduction in the quantum of punishment is necessary.

Keeping in mind the seriousness of allegations against the Petitioner which have been proved in the proceedings, this Court is not inclined to interfere with the judgment passed by the Appellate Authority.

Hence, the Writ Petition is dismissed along with the pending applications, if any.

For Official Judgment Download PDF Given Below: